Organizational structure and design are two closely related concepts in business. The former represents the structure of positions, power, and responsibilities in a company. The structure flows from the top executive to the lowest frontline employee. Organizational design is a strategy that defines how a company unifies its departments and individuals in order to achieve goals. Essentially, this latter activity is about planning rather than organizing, and while they are different, changes to one often results in changes to the other.

Creating an organizational structure is not often an easy process. It takes some time to organize positions in large businesses, which are often the users of organizational structure. The biggest issue is often how to create a formal link for supervisory purposes. Each link between upper management positions needs to oversee employees that have relatable skills and attributes. This creates a strong sense of management–employee relationships in each line of the organizational structure.

A company’s organizational structure and design are distinctly different due to the differences between creation and planning. For example, after a company creates its organizational structure, it needs to design the work flow for the business operations. These may be designed based on product lines, functions, or a hybrid between these two designs or others. In many cases, the design process must begin after the creation of an organizational structure. Changes may be more frequent in organizational design but not structure.

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Most business industries have standard organizational structures and designs. These standard structures and designs help a company entering the market have an idea about the business. Though some small changes may be necessary to tweak the structure or design, they are essentially the same. Having a standard plan allows a company to ensure an efficient and effective set of operations. Formal industry standards for organizational structure and design also ensure compliance with external requirements.

A company’s organizational structure and design should remain fluid during a company’s lifetime. This allows the business to remain flexible during changes in the economic environment or internal changes from product variations. In some cases, an organizational design may be easier to change than a formal organizational structure. This is possible because strategies shift due to changes in the business environment. A formal organizational structure based on roles and responsibilities is more difficult to change because it means adding a new position or removing one in order to improve the company’s operations.

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